Thank you for registering for the Borgess CorpFit Workers Compensation Webinar

For more information contact:Megan Inman, Borgess CorpFit Account Executive

(269) 226.7056 megan.inman@borgess.com

Len Hickey, Hickey Combs PLC (616) 364.2550 lhickey@hickeycombs.com

Visit us online at:CorpFit.Borgess.com

www.HickeyCombs.com

Presentation will begin at 9:05 a.m.

Borgess CorpFit

Presents

HOW TO EFFECTIVELY IMPLEMENT RECENT STATUTORY CHANGES TO REDUCE WORKERS’

COMPENSATION EXPOSURES AND COSTSA Webinar

By

Leonard M. HickeyHICKEY COMBS PLC

3358 Eagle Run Drive NEGrand Rapids, MI 49525-7055

Phone: 616.364.2550Facsimile: 616.364.2551

Email: lhickey@hickeycombs.comWebsite: www.hickeycombs.com

THE NEW AMENDMENTS – 2011 PA 266

• House Bill 5002 was introduced on September 22, 2011.

• After House and Senate modifications, it passed both houses and it was signed by the Governor and given immediate effect on December 19, 2011.

THE DEFINITION OF DISABIILTY:§301 and §401

• Problem: Prior definitions of disability were too encompassing and failed to provide an incentive to look for work.

• Codification of Stokes: To establish an initial showing of disability, the employee must:

• Disclose his/her qualifications and training §301(5)(a).

• Provide evidence as to the jobs he/she is trained to perform within the same pay range as his/her maximum wage earning capacity §301(5)(b).

THE DEFINITION OF DISABIILTY:§301 and §401

• Demonstrate that the work-related injury prevents the employee from performing the jobs identified that pay maximum wages §301(5)(c).

• If the employee is capable of performing any of the jobs identified above, he/she must show that they cannot obtain any of those jobs. Evidence shall include a showing of an attempt to procure jobs at the employee’s maximum wage earning capacity §301(5)(d).

THE DEFINITION OF DISABIILTY:§301 and §401

• If the plaintiff has met his initial showing under §301(5), the burden shifts to the employer to refute the employee’s showing of disability by establishing that there are jobs:

• “Reasonably available” at or above the employee’s maximum wage earning capacity – no disability.

• “Reasonably available” below the employee’s previous wage – partial disability. Benefits are equal to 80% of the difference between the injured employee’s after tax average weekly wage before the personal injury and the employee’s wage earning capacity after the personal injury

THE DEFINITION OF DISABIILTY:§301 and §401

• The employee may present evidence to refute the employer’s proofs. A Magistrate may consider a good faith job search in assessing whether jobs are reasonably available §301(4)(a). The statute also provide that an employee has an affirmative duty to seek work reasonably available to that employee §301(4)(b). It is unclear if this includes jobs below their maximum wage.

THE DEFINITION OF DISABIILTY:§301 and §401

• When is work “reasonably available”?• How many jobs?• Existence of jobs versus job openings.• Jobs claimant applies for but does not obtain.• Proximity of jobs to claimant’s residence.• Static versus ongoing analysis.

THE DEFINITION OF DISABIILTY:§301 and §401

• Practical application• Light duty job offer is still the best way to

diminish wage loss exposure• If light duty work is unavailable, provide to the

employee job leads for jobs “reasonably available to” the employee

THE DEFINITION OF DISABIILTY:§301 and §401

• Practical application• If the employee does not seek reasonably

available work, consider disputing or reducing wage loss benefits based upon the maximum pay in reasonably available jobs

• If employee is unable to procure work within his/her restrictions after a good faith effort, the employee is entitled to receive full wage loss benefits MCL 418.301(4)(c), 418.401(2)(d)

CAUSATION INVOLVINGPRE-EXISTING CONDITIONS

• Problem: Employees could receive benefits for subjective symptoms of preexisting condition without showing a new injury or medical condition.

• Pathological Changes – Pre-Existing Conditions• Rakestraw/Fahr: Codified in §301(1) and §401(2)

(b) – “A personal injury under this Act is compensable if work causes, contributes to, or aggravates pathology in a manner so as to create a pathology that is medically distinguishable from any pathology that existed prior to the injury.”

CAUSATION INVOLVINGPRE-EXISTING CONDITIONS

• Pathological Changes – Pre-Existing Conditions• Employer must show that the work injury involved

a pre-existing condition. • Employee must prove the work injury caused,

contributed to, or aggravated the preexisting condition in a manner medically distinguishable from the preexisting pathology.

• Investigate the existence of preexisting conditions.

CAUSATION INVOLVINGPRE-EXISTING CONDITIONS

• Pathological Changes – Pre-Existing Conditions• Has the employee established that the work injury caused a

medically distinguishable condition or a change in the underlying pathology of the pre-existing condition?

• Is medical testimony regarding a change in pathology in the absence of objective support sufficient?

• If not, the claim may be disputed

• Are transient symptomatic expressions of a pre-existing condition compensable?

“DEGENERATIVE ARTHRITIS” MCL 418.301(2)

• Problem: Degenerative arthritis was compensable if merely aggravated by work.

• Degenerative arthritis – conditions of the aging process including, but not limited to, heart and cardiovascular conditions and degenerative arthritis are compensable only if contributed to or aggravated or accelerated by employment in a significant manner. §301(2)

• “Degenerative arthritis” is explicitly deemed to be a condition of “the aging process”

• It is subject to a higher standard of proof, the “significant

manner” standard.

MENTAL DISABILITIES – MCL 418.301(2)

• Problem: Employee could receive benefits for inaccurately perceiving an event of employment..

• The significant manner standard applies• Must arise out of actual events of employment, not

unfounded perceptions.• The employee’s perception of actual events must

be reasonably grounded in fact or reality.

MENTAL DISABILITIES – MCL 418.301(2)

Two employees are talking about a “Saturday Night Live” episode.. From across the room, a paranoid employee sees the co-employees laughing and mistakenly believes that they are laughing “about him”. He chooses to decompensate and files a workers’ compensation claim.

• Significant manner standard - maybe .

• Must arrive out of actual events of employment, not unfounded perceptions – yes/no.

• The employee’s perception of the actual events must be reasonably grounded in fact or reality – no.

TERMINATION OF EMPLOYEES ON “FAVORED WORK”

• Problem: Prior to the amendments if the employee, after having been employed on favored work for less than 100 weeks, lost his/her job for “whatever reason”, the employee received benefits at their original rate.

• Pursuant to §301(9)(b), if an employee is terminated from reasonable employment for “fault” of the employee, the employee is considered to have voluntarily removed himself/herself from the workforce and is not entitled to any wage loss benefits under the Act. Presumably, reasonable, necessary, and related medical expense is still paid.

• The statute does not say “just cause” termination.

SPECIFIC/SCHEDULED LOSS: REVERSAL OF TRAMMEL DECISION

• Problem: Joint replacement could result in award of scheduled/specific loss of benefits.

• In Trammel v Consumers Power Co, 2009 ACO #126, the employee sustained a work-related injury, requiring knee replacement surgery. The employee had an excellent functional result from the surgery. Three months after the surgery, the employee returned to work and performed unrestricted work for 15 months. He then retired and sought specific loss benefits for loss of his leg. Specific loss benefits are provided for the loss of a limb/digit or the constructive loss (loss of industrial use), irrespective of general disability

SPECIFIC/SCHEDULED LOSS: REVERSAL OF TRAMMEL DECISION

• Pre-surgical or post-surgical? The employee asked the Magistrate to decide the claim with reference to only the employee’s pre-surgical condition. The employer argued that the Magistrate should focus on the employee’s post-surgical condition.

In an en banc opinion, the Appellate Commission affirmed the Magistrate’s award of specific loss benefits, holding that the employee’s claim should be decided based upon his pre-surgical condition, before any medically corrective measures had been taken (uncorrected state). Thus, it was held that the plaintiff was entitled to 215 weeks of wage loss benefits..

SPECIFIC/SCHEDULED LOSS: REVERSAL OF TRAMMEL DECISION

• MCL 418.361(2) provides that the effect of any internal joint replacement surgery, internal implant, or other similar medical procedure shall be considered in determining whether a specific loss has occurred.

• In all joint replacement and implant cases, attempt to obtain a medical opinion that the joint replacement or implant has preserved the employee’s “industrial use” of the limb to disprove specific loss

EMPLOYER CONTROL OF MEDICAL CARE

• Problem: Employer could only direct medical care for the first 10 days after the injury.

• MCL 418.315(1) extended the employer’s ability to control medical care from 10 days to 28 days

• Employers should exercise their right to control the employee’s medical treatment for a minimum of 28 days

• If the employee does not provide the employer with notice of the name of the provider and his/her intention to treat with that provider after the 28 days, the employer should continue to direct the employee’s medical treatment

COORDINATION OF EMPLOYER-FUNDED RETIREMENT BENEFITS

• Problem: Although eligible for retirement, employees would delay taking retirement benefits to avoid coordination of benefits.

• MCL 418.354(1)(d) – provides that an employer may coordinate the after-tax amount of a pension or retirement received, or which the employee is eligible to receive if the employee is:

• Totally and permanently disabled• Has reached full retirement age

• This provision is inconsistent with §354(16) which provides that total and permanent disability benefits are not subject to coordination

INTEREST ON AWARDS

• Problem: Statutory interest rates on workers’ compensation award were much higher than market rates.

• MCL 418.801(6) eliminated the 10% standard rate and allowed for calculation of interest as in civil cases MCLA 600.6013 (tied to the prevailing interest rate).

DETERMINING EMPLOYMENT STATUS

• Current provision – MCL 418.161(1)(n): Every person performing services in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service (1) does not maintain a separate business, (2) does not hold himself or herself out to render service to the public, and (3) is not an employer subject to this act.

• Employee versus independent contractor?• MCL 418.161(1)(n) – not effective until 01/01/13

DETERMINING EMPLOYMENT STATUS

• Michigan Administrative Hearing System (MAHS) determines whether services performed by an individual are employment in an employer-employee relationship

• On its own? • At the request of a business entity • Using the IRS 20-factor test

DETERMINING EMPLOYMENT STATUS

• If the “employer” is required (attached) to withhold federal income tax for an individual, the individual is prima facie considered to be an employee

• Prior MAHS determinations of coverage are precedential as to similarly situated individuals

RETROACTIVITY OFMCL 418.301 AND 418.401?

• Generally, the statutory amendments are effective only for injury dates occurring on or after the date Governor Snyder signed the bill into law on December 19, 2011.

• Amendments relating to independent contractors are not effective until January 1, 2013.

INTERPRETATION AND APPLICATION OF NEW AMENDMENTS

• New administrative rules?• Advocacy• Appellate decisions• How aggressive can/should the amendments be

implemented?• Impact on settlements

RECENT DEVELOPMENTS UNDER THE SNYDER ADMINISTRATION

• Michigan Administrative Hearing System

• Michigan Compensation Appellate Commission

• New appointments and re-appointments to Board of Magistrates and Appellate Commission

• Fewer magistrates (17 vs. 26?)

• Nine magistrates subject to reappointment in January

• Closing of Flint Hearing Site 12/10/12

• Enforcement of 42-day rule regarding issuance of opinions

• Proposed rules to expedite hearing process

• Evidence-Based Medicine

Questions

Thank you for attending the Borgess CorpFit Workers Compensation Webinar

For more information contact:Megan Inman, Borgess CorpFit Account Executive

(269) 226.7056 megan.inman@borgess.com

Len Hickey, Hickey Combs PLC (616) 364.2550 lhickey@hickeycombs.com

Visit us online at:CorpFit.Borgess.com

www.HickeyCombs.com